Model question paper III

Section A (30 marks)

Part I: Essay
(20 marks)

Write an essay of 350-400 words on one of the topics given below. Marks will be deducted for
wrong grammar and spelling and poor punctuation and sentence construction. Use technical terms
only after defining them.

• Food inflation in India

• Can Europe sustain a common currency
• Depreciation of Indian Rupee

Part II
(1 X 10 = 10 marks)

1. If 65789 is represented by 01101 then how is 784329 represented?

a) 100101 c) 11111
b) 11010 d) 100111

2. If ‘+’ means ‘×’, ‘-‘ means ‘÷’, ‘×’ means ‘ +’, ‘÷’ means ‘-’, what would be the value
of “10×18-9+3÷1”?
a) 15 c) 168
b) 20 d) 180

3. The value of A is 1 if A% of 100 is1, then what is the value of p if p% of 50 is 85?

a) 180 c) 170
b) 160 d) 185

4. √5 + √3 =?
√5 - √3
a) 6+ √15 c) 5+ √15
b) 4- √15 d) 4+ √15

5. Jayesh is taller than Mohan but shorter than Ashok. Shashi is taller than Mohan but
shorter than Vijay. Who among them is the tallest?
a) Ashok c) Either Vijay or Ashok
b) Vijay d) None of these

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 Model question paper III

Contd… Section A : Part II

Answer next five questions using the number tower given below.

2 3 4

5 6 7 8

9 10 11 12 13

14 15 16 17 18 19

20 21 22 23 24 25 26
6. If 91510 : 131812 then 152216 : ?
a) 192518 c) 182519
b) 182417 d) 172418

7 If 516: 615 then 1124 : ?

a) 2312 c) 1021
b) 1225 d) 1223

8. If 92221: 132425 then 51615:?

a) 81718 c) 112223
b) 71617 d) 81716

9. If 2109: 13124 then 61615:?

a) 71718 c) 17177
b) 19188 d) 81819

10. If 211016 : 251217 then 926 : ?

a) 1343 c) 1384
b) 1236 d) 1347

Section B
(1 X 40 = 40 marks )
1. Consider the equitation log y =10+5 log x, where x is measured in rupee and y is measured
in tones. If units are changed so as to measure x in thousand rupee and y in the kilograms,
the values of slope parameter would be
a) 500 c) 5000
b) 5 d) none of the above

2. If the demand curve slopes down, and the supply curve slopes up
a) Excess demand increases as price c) Excess demand increases as price falls
increases
b) Excess supply decreases as price d) None of the above in correct
increases

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 Model question paper III

Contd… Section B

3. Additional spending can be induced by fiscal policy by means of

a) a reduction of the national debt c) tax reduction
outstanding
b) an increase in tax rates d) reduction of the deficit

4. A budget deficit will increase GNP only if

a) the government borrows money that c) the government borrows from households
otherwise would have been spent on money that otherwise would have been
investment lent to firms
b) the government borrows money that d) the government spends the money abroad
otherwise would not have been spent rather than at home
at all

5. A fall in demand for the product of a monopolized industry is predicted to lead to

a) a fall in price c) a decrease in the number of firms in the
long run
b) a decrease in the output of each firm d) None of the above answers is satisfactory

6. The hypothesis of qualified joint profit-maximization implies that firms

a) are profit-maximizers c) will act as if they had a monopoly
b) are unselfish d) are able to exploit the gains from limiting
competition in some respects, but not in
all respects

7. A change in factor prices

a) changes long-run cost-curve positions c) alters the optimal factor proportions
b) changes short-run cost-curve positions d) is likely to do all of the above

8. Which of the following statements is correct for a profit-maximizing firm? Total Revenue
greater than or equal to Total Cost is
a) Necessary but not sufficient c) Necessary and sufficient
b) Sufficient but not necessary d) Neither necessary nor sufficient

9. The theory of price discrimination predicts that in comparison to single-price monopoly

a) output will increase, and average c) output will decrease, and average revenue
revenue will decrease will decrease
b) output will increase, and average d) output will decrease, and average revenue
revenue will increase will increase

10. A rightward shift in the supply curve of some product will reduce the equilibrium price to a
greater degree
a) the more elastic is the demand curve c) the more the elasticity of demand
diverges from unity in either direction
b) the less elastic is the demand curve d) the closer the elasticity of demand is to
unity
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 Model question paper III

Contd… Section B
11. Among the essential aspects of oligopoly is
i) Excess capacity ii) Non-price competition
iii) A large number of firms iv) Mutual recognition of interdependence
a) Both i) and ii) are satisfactory c) Only iv)
b) Both ii) and iii) are satisfactory d) None of the above is satisfactory

12. The real balance effect results from

a) the fact that using money rather than c) any increase in the amount of bonds
barter raises the economy’s wealth. owned by the average person.
b) an increase in wealth resulting from d) none of the above.
lower interest rates.

13. Below are given names of four authors (on the left hand side) and titles of four books (on the
right hand side)
A. Hicks, J. I. Asian Drama: Inquiry Into the Poverty of Nations
B. Marshall, A. II. Value and Capital
C. Robinson, J. III. Principles of Economics
D. Myrdal, G. IV. Economics of Imperfect Competition
Which of the following matching is correct?
a) A – I, B – III, C – IV, D – II c) A – IV, B – II, C – III, D – IV
b) A – II, B – IV, C – III, D – I d) A – II, B – III, C – IV, D – I

14. The theory of Big Push refers to

a) the attempt by the economies to c) to advantage of having trade relations
become big in terms of population with big neighbours
b) the attempt to build big foreign d) the attempt to go for big investment
exchange reserves planning

15. A monopolist practicing third degree discrimination faces the following demand functions in
the two markets:
P1 = 100 – 0.5 Q1 and P2 = 100 – 4 Q2
while he faces a constant marginal cost of production (Pi and Qi refer to price and quantity in
market i). Profit maximization will imply
a) P1 > P2 c) P1 = P2
b) P1 < P2 d) Relation between P1 and P2 cannot be
determined without knowing the exact
cost function

16. In a two-country – two-commodity – one factor framework, suppose home country requires
4 units of labour to produce 1 unit of commodity X and 2 units of labour to produce 1 unit of
commodity Y. The foreign country’s unit labour requirements for X and Y are 3 and 1,
respectively. If international trade opens up, the likely trade pattern will be:
a) home country exports X and imports c) trade pattern is indeterminate until labour
Y endowments and wage rates are known
b) home country exports Y and imports d) there cannot be any trade as foreign
X country is able to produce both X and Y
at cheaper cost
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 Model question paper III

Contd… Section B

17. Which one of the following would best indicate the economic growth? An index of
a) Real national output c) Export volumes
b) Share prices d) Manufacturing output

18. An economy is populated by individuals who have the same preferences. We can conclude
that there is no welfare gain from allowing them to trade
a) True c) Uncertain
b) False d) True, if there are only two goods

19. Last year a ₤400 million tax increase was accompanied by a ₤600 million decrease in
consumer spending. One reason why spending decreased by more than taxes were increased
is that:
a) the tax increase raised interest rates c) reduced spending by those with lower
which in turn depressed consumer take-home pay led to decreased income
borrowing. and spending by others.
b) the tax increase induced fewer transfer d) higher taxes required higher government
payments which in turn deterred spending which in turn discouraged
consumer spending. private spending.

20. In the classical model, given an initial aggregate equilibrium at full employment, the long
run effect of an increase in government spending is
a) increase in the price level c) constant level of output
b) an upward shift of the aggregate d) all of the above
demand curve
21. Mr. A has utility function U ( x1 , x 2 ) = x11 / 4 x 12 / 3 . Prices are p1 = 3 and p2 = 2.
Miss B has utility function U ( x1 , x 2 ) = x1 x 2α . If they both have income of 10, for which
value(s) of α are their choices of goods the same?
a) 3 / 4 c) 4
b) 1/3 d) 4/3
22. Two countries with given quantities of labour and capital can produce only two commodities
and can trade only with each other. Country A can produce 10 tons of coal or 10 tons of
steel, but country B can produce only 8 tons of coal or 5 tons of steel.
Assuming constant costs, Country B should:
a) import coal and export steel c) export both coal and steel
b) export coal and import steel d) import both coal and steel
23. Using the equation of exchange, if the money supply is $4 trillion, the price level is 2,
and the level of output (real GDP) is $6 trillion, then the velocity of money is:
a) 12 c) 1.33
b) 3 d) 3

24. In the quantity theory of money, where MV = PT:

a) M stands for the manufacturing index. c) Money supply is indirectly related to
price level.
b) PT stands for private transfers. d) Velocity is directly related to the level of
transactions.
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 Model question paper III

Contd… Section B

25. An increase in the use of quotas is expected to:

a) reduce the country’s current account c) have no impact on the country’s current
balance, if other governments do not account balance unless other
retaliate. governments retaliate.
b) increase the country’s current account d) increase the volume of a country’s export
balance, if other governments do not with other countries.
retaliate.

26. Milton Friedman and Anna Schwartz believed that monetary policy was ineffective because
of the __ lag.
a) information c) Decision
b) recognition d) Implementation

27. The phenomenon of hoarding money when the interest rate falls to low levels is called the:
a) liquidity trap. c) precautionary demand for money.
b) transactions demand for money. d) deflation.

28. Which of the following statements is NOT a difference between the classical and Keynesian
monetary theories?
a) Keynes emphasized the role of the c) Keynesian analysis emphasizes the long
speculative demand for money, run, whereas the classical economists
whereas classical economists focused focus on the short run.
on the transactions demand.
b) Classical economists use the quantity d) The classical approach says that
theory channel, while Keynesians uses monetary changes directly affect the price
the interest rate channel. level, while the Keynesian approach
states that changes in money affect the
economy only indirectly through changes
in interest rates and investment.

You are trying to evaluate whether the labor market for computer scientists is competitive or
monopsonistic. You know that the production function for computers depends only on labor
input: Y = -0.5 L2 + 10L, where Y is the output of computers and L is the quantity of labor
used. The price of a computer is p = 2. You also know that the labor supply, as a function of
the wage, for computer scientists is the following, where w is the wage per unit of labor:
L = -10 + w.
Based on the information given above please solve the questions no. 29,30,and 31
29. If the market for computer scientists were competitive, what would be the demand function
for labour?
a) L = 10- 0.5w c) L= 5 – 2w
b) L= 10 –w d) L=10 + 0.5w

30. What is the equilibrium wage rate that would prevail if the market for computer scientists
were competitive?
a) 20 c) 31.5
b) 13.33 d) 12.59
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 Model question paper III

Contd… Section B

31. What is the equilibrium employment that would prevail if the market for computer scientists
were competitive?
a) 5 c) 3.33
b) 11 d) 17

32. Consider an economy where only two goods are produced: cars and motorcycles. If one unit
of capital can produce more cars than motorcycles then it is efficient to employ all the
available capital in the production of cars.
a) True c) Uncertain
b) False d) True, if Government gives tax rebate on
loans to buy motorcycle.

33. If there are two firms, producing homogeneous products, engage in price competition,
a) consumer surplus will be higher than c) firms will never incur loss irrespective of
that under perfect competition their cost structure
b) consumer surplus will be lower than d) none of the above
that under quantity competition

34. Weak home currency may not be a perfect solution to correct a balance of trade deficit
because:
a) it reduces the prices of imports paid c) it prevents international trade transactions
by local companies. from being prearranged.
b) it increases the prices of exports by d) foreign companies may reduce the prices
local companies. of their products to stay competitive

35. Which of the following statements would a macroeconomist who embraces the rational
expectations/neoliberal paradigm accept as an appropriate assumption?
a) The whole is exactly equal to the sum c) Investors and innovators always behave
of its parts. rationally.
b) A macroeconomic model must be d) All are right.
based on a logical set of
microfoundations.

36. What is the component which is not included under M1 (Narrow Money) calculation in
India:
a) Notes in circulation c) Deposits with RBI
b) Deposits with bank d) Post office deposits

37. Which of the following statements are true about the Keynesian consumption function?
a) It relates consumer demand and c) Consumption depends on accumulated
disposable income. wealth.
b) The real interest rate r determines how d) When people change their expectations
people allocate income between about their permanent lifetime income,
savings and consumption. their current consumption changes even
though their current income may not
change.
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 Model question paper III

Contd… Section B

38. According to Friedman, if the stock market rises rapidly in value, the:
a) demand for money will increase. c) demand for money will be unaffected.
b) demand for money will decrease. d) marginal propensity to consume will
decrease.

39. The circular flow of income for a private sector model shows
a) the flow of income between the c) the flow of income between household,
household and the business sectors business and government sector.
b) the flow of income between d) the flow of income between government
government and business sector and household sector.

40. Which of the following factors will NOT shift the consumption schedule?
a) income c) family debt
b) wealth of a family d) expectations about future prices and
income

Section C
(1 X 30 = 30 Marks )
1. The heights of a sample of ten people are
67 73 70 60 67 66 68 71 70 67.
Which are the correct real limits for the frequency table given below?

Frequency (a) (b) (c)

-------------------------------------------------------------------
1 60.5-63.5 60-62 59.5-62.5
0 63.5-66.5 63-65 62.5-65.5
5 66.5-69.5 66-68 65.5-68.5
3 69.5-72.5 69-71 68.5-71.5
1 72.5-75.5 72-74 71.5-74.5

a) Column (a) is correct c) Column (c) is correct

b) Column (b) is correct d) None of columns (a), (b), (c) are correct

2. The standard deviation of a group of scores is 10. If 5 were subtracted from each score, what
would be the standard deviation of the new scores?
a) 2 c) 5
b) 10/25 d) None of these

3. “Statistical methods may be described as methods for drawing conclusions about ------------
based on----------- computed from the------------.”
What will be the missing words to the quote?
a) Populations, parameters, samples c) Parameters, statistics, populations
b) Statistics, parameters, samples d) Populations, statistics, samples

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 Model question paper III

Contd… Section C

4. The distribution of the heights of students in a large class is roughly bell shaped. Moreover,
the average height is 68 inches, and approximately 95% of the heights are between 62 and 74
inches. What is the standard deviation of the height distribution approximately?
a) 2 c) 6
b) 3 d) 9

5. What will be the value of the determinant of the matrix?

2 1 1
1 1 0
3 2 1

a) 0 c) 6
b) 3 d) 5

6. Find no of ways in which two books on economics and three books on accountancy can be
arranged in a line.
a) 60 c) 24
b) 120 d) 40

7. A sample of 3600 cases is drawn at random from an infinitely large population. The standard
deviation of the population is 10. What is the standard error of the mean?
a) 1/6 c) 4/5
b) 2/15 d) 10

8. Four Indian and three American students have to stand in a row for a photograph. If they
choose their position at a random. What is the probability that Americans are at extremes.
a) 1/7 c) 2/7

b) 4/35 d) 2/9

9. Five Men and three women are to sit around a circular table. If they chose their positions at a
random. What is the probability that no two women are adjacent?
a) 1/7 c) 2/7
b) 1/9 d) 2/9

10. Which of the following is an example of Type II error?

a) The null hypothesis is false and c) The alternative hypothesis is true and
accepted accepted
b) The null hypothesis false and rejected d) The alternative hypothesis is not framed
correctly

11. In a Bernolli experiment the probability of success is 0.2 and the number of trials is 7.
The approximate probability of getting one success is
a) 0.294 c) 0.425
b) 0.367 d) 0.550
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 Model question paper III

Contd… Section C

12. Which of the following measure will remains unchanged when every observation in the data
set is divided by the same quantity?
a) Quartile deviation c) Coefficient of Variations
b) Standard Deviation d) Mode

13. The requisites of good average is

a) It should be difficult to compute c) It should be capable of mathematical
manipulation
b) It should be capable of simple d) Both (b) and (c)
interpretation

14. Which of the following distribution is identified by a pair of degree of freedom?

a) t- distribution c) Normal distribution
b) Binomial distribution d) F- distribution

15. If the correlation between two variables is -1 and 0, then the covariance between them is
a) Positive c) Zero
b) Negative d) None of all

16. If we sum all the probabilities of the conditional events in which the event A occurs which
under statistical dependence, the result is
a) The marginal probability of A. c) The conditional probability of A.
b) The joint probability of A. d) None of these.

17. Power of the test is

a) Α c) Β
b) 1-α d) 1 – β

18. To test the significance of an entire regression we use

a) F-test c) The exponential distribution
b) Chi-square test d) t-test

19. Fisher’s ideal price index is a

a) Laspeyres index b) Simple average index
b) Paasche index d) Geometric average of Laspeyres and
Paasche index

20. Which of the following would likely be a trend component of a time series?
a) Holidays c) Population growth
b) Law suits d) Recessions

21. If we are surveying a population that is spread over a large geographic region, it is best to
use
a) Simple random sampling c) Stratified random sampling
b) Cluster sampling d) A census
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 Model question paper III

Contd… Section C
22. The distance from city A to city B is 150 km, from city A to city C, 90 km. Therefore, it is
necessarily true
a) The distance from B to C is 60 km c) Neither a nor b
b) Six times the distance from city A to d) Both a and b are true
B equals ten times the distance from
A to C
23. A single letter is selected at random from the word “PROBABILITY”. The probability that it
is a vowel is given by
a) 2/11 c) 4/11
b) 3/11 d) 5/11
24. For children between the ages of 18 months and 29 months, there is approximately a linear
relationship between “height” and “age”. The relationship can be represented by: Y = 64.93
+ 0.63(x), where Y represents height (in centimeters) and X represents age (in months).
Joseph is 22.5 months old and is 80 centimeters tall. What is Joseph’s residual?
a) 79.1 c) +0.9
b) -0.9 d) 56.6
25. In a statistical test for the equality of a mean, such as H0 : µ = 10, if α = 0.05,
a) 95% of the time we will make an c) 5% of the time we will say that there is
incorrect inference no real difference when there is a
difference
b) 5% of the time we will say that there d) 95% of the time the null hypothesis will
is a real difference when there is no be correct
difference
26. Newton’s law of gravity is an example for
a) Stochastic relationship c) Deterministic phenomena
b) Statistical relationship d) Comparing economics to science
27. Data collected for a variable over a period of time is called
a) Cross – sectional data c) Pooled data
b) Time series data d) Panel data
28. The data on GDP, unemployment, household expenditure are example of
a) Experimental data c) Cross – sectional data
b) Non – experimental d) Time series data

29. What is the number of degrees of freedom for a simple bivariate linear regression with 100
observations?
a) 100 c) 98
b) 97 d) 2
30. For HO: β2 = 0; H1: β2 ≠ 0 ; this is
a) One – sided hypothesis test c) Open ended hypothesis test
b) Two – sided hypothesis test d) t- test

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